The GASB 101 effective date is fiscal years beginning after December 15, 2023, which means most state and local governments applied the standard for the first time in their fiscal year 2024 or 2025 financial reports.1Governmental Accounting Standards Board. Summary – Statement No. 101 The requirement carries into every subsequent annual and interim report from that point forward. Which specific report is the first compliant one depends on when your fiscal year starts, and the transition entry you owe at adoption depends on what your compensated absences liability looked like under the old rules.
First Compliant Report by Fiscal Year Start
The effective-date language reads “fiscal years beginning after December 15, 2023, and all reporting periods thereafter.”1Governmental Accounting Standards Board. Summary – Statement No. 101 Translated to the three most common fiscal calendars in the public sector:
- Calendar-year governments (January 1 start): the first mandatory fiscal year began January 1, 2024, and the first compliant annual report covers the period ending December 31, 2024.
- Governments with a June 30 fiscal year-end, which is the most common structure for state and local governments: the first mandatory fiscal year began July 1, 2024, with the first compliant annual report covering the period ending June 30, 2025.
- Governments with a September 30 fiscal year-end: the first mandatory fiscal year began October 1, 2024, producing a compliant report for the period ending September 30, 2025.
If your fiscal year began on or before December 15, 2023, that year was your last one under Statement No. 16. The changeover happens at the start of the next fiscal year, not partway through.
Early Adoption
GASB encouraged early application of Statement No. 101, so governments were permitted to adopt before the mandatory dates.1Governmental Accounting Standards Board. Summary – Statement No. 101 A government that took that route had to apply the new rules to all periods presented in its financial statements, keeping comparative data consistent. The decision to adopt early should be documented in the notes, with an explanation that the updated measurement approach was applied ahead of the mandatory date.
What Has to Be Ready on the Effective Date
Statement No. 101 replaces the split framework in Statement No. 16, which distinguished vacation from sick leave and vesting from accumulating leave. A single recognition and measurement model now covers all compensated absences, and the vesting requirement is gone.2Governmental Accounting Standards Board. Compensated Absences – Reexamination of Statement 16 For many governments that means sick leave which previously carried no recognized liability now must be measured and reported.
By the effective date, your accounting policies and leave records need to support three tests. A liability is recognized when leave is attributable to services already rendered, accumulates from one reporting period into a future period, and is more likely than not to be used or paid out (a greater than 50 percent chance of eventual settlement through time off, cash payout, or another means).3Governmental Accounting Standards Board. Statement No. 101 Compensated Absences The “more likely than not” judgment draws on your own employment policies, historical usage patterns, and payout experience, and it is reassessed every reporting period rather than set once.1Governmental Accounting Standards Board. Summary – Statement No. 101
Measurement uses each employee’s pay rate as of the financial statement date, not a projected future rate. Salary-related payments that are directly and incrementally tied to leave payouts, most commonly the employer’s share of Social Security and Medicare taxes, are folded into the liability. Salary-related payments connected to defined benefit pension or OPEB plans are excluded.3Governmental Accounting Standards Board. Statement No. 101 Compensated Absences
A few leave types sit outside this recognition model even after the effective date, including parental leave, military leave, jury duty leave, unlimited leave policies, fixed-date holiday leave, and leave more likely than not to be settled through conversion to a defined benefit postemployment plan.3Governmental Accounting Standards Board. Statement No. 101 Compensated Absences Do not assume every category of paid time your government offers generates a liability under the new rule.
The Transition Entry You Owe at Adoption
The switch to Statement No. 101 is handled as a change in accounting principle. At transition, the government records the cumulative effect as an adjustment to the beginning net position, or fund balance for governmental funds, of the earliest period presented. That restates the opening balance so comparative periods read on a consistent basis.
If your report presents two or more years side by side, the prior period’s opening balance is adjusted as well. The notes should explain the nature of the restatement and the reason for the change. The mechanical work is going back through historical leave records, recalculating what the liability would have been under the new criteria, and booking the difference from the previously reported amount.
This is where implementation effort concentrates. Leave that carried no recognized liability under Statement No. 16, nonvesting sick leave in particular, may now clear the “more likely than not” threshold and require recognition. For governments with generous sick leave accrual, the resulting increase in the reported liability can be substantial. Detailed work papers supporting the adjustment matter for surviving external audit review.
Who the Effective Date Binds
Statement No. 101 applies to the financial statements of all state and local governments.3Governmental Accounting Standards Board. Statement No. 101 Compensated Absences That covers state agencies, counties, cities, townships, school districts, public universities, special districts, public authorities, and public benefit corporations. Public employee retirement systems and government-sponsored healthcare plans that carry compensated absences liabilities for their own employees are equally covered.
Size does not change the deadline. A small fire protection district with a handful of employees follows the same effective date and the same recognition and measurement rules as a state government with tens of thousands of workers. Failing to implement on time can produce a qualification or adverse opinion in the annual audit, which can in turn affect bond ratings and borrowing costs.